Strategies and Considerations for a High Net Worth Divorce

High net worth clients in Atlanta going through a divorce generally have multifaceted financial pictures that include the division of tangible property with substantial monetary value.

This may include, cash, real estate, a business or business partnership, investment and retirement accounts, and other assets.

As a result, high-asset divorces are always more complex and require an attorney with extensive experience.

Determining the Value of Assets

High net worth divorces can include multiple rental properties, part ownership in various companies, equity options in pre-IPO stock, partnership holdings, etc.

Assets may be hidden which require forensic accountants to uncover the total financial picture.

Property Division in High Net Worth Divorces

In Georgia, courts seek to achieve an equitable (meaning “fair”), not necessarily always equal, division of marital property in divorce cases.

This equitable division is an allocation of assets acquired during the marriage and may include property acquired by one or both spouses, no matter how the title is held.

For the most part, marital property is evenly divided, including tax considerations impacting each asset and/or the transfer of an asset to the other party.

Separate property, (property owned by one spouse prior to the marriage, or property that has been inherited by one party or gifted to one party (excluding interspousal gifts) may not be subject to equitable division, depending on certain criteria, such as title, comingling, or active management.

Separate property issues can present complexities that often require a careful analysis and frequently require the use of a forensic accountant to trace any separate property component, increased value, or comingling of assets.

Business Interests in High Net Worth Divorces

When ownership in a business, or multiple businesses, is involved in a high net worth divorce, an expert valuation by financial experts or forensic accountants may be necessary.

Dividing the assets may include selling the business and splitting the proceeds, splitting the business if a viable option, buyout of the other party’s interest in the business, or continuing joint ownership.

Protecting your business can involve pre- or post-nuptial agreements, legally establishing yourself as the sole owner, and careful recordkeeping of the capital invested in the company.

Owners should keep business and personal expenses separate and document all cash transactions (if applicable). Understand the potential consequences of paying yourself an income under market value.

Your spouse could assert that a competitive salary should be calculated as income for purposes of determining support.

Retirement Accounts in High Net Worth Divorces

Before defined contribution plans to retirement plans (401(k) plans, 403(b) plans and Thrift Savings Plans) can be split, the court must issue a Qualified Domestic Relations Order (QDRO). Once signed by a judge, the QDRO makes the asset split official, and can then be enforced by plan administrators.

A QDRO is not needed to split Individual Retirement Accounts (IRAs) and Roth IRAs.

The court will most likely split funds under the “incident to divorce” provision in the tax code. This allows the balance to be split among both ex-spouses tax-free within a year following the official divorce date.

Pension assets are considered joint property and are usually divided equally. Funds accumulated before the marriage remain with the original owner. Distribution of the plan may be taken as a lump-sum versus a monthly annuity payment, depending on the specific terms and provisions of the plan documents.

Some pensions also allow survivor benefits which can be important for children or an ex-spouse.

A financial advisor is helpful when making decisions regarding distribution and any tax implications.

Prenuptial and Postnuptial Agreements in High Net Worth Divorces

As mentioned earlier, prenuptial and postnuptial agreements, if properly drafted, can not only protect the assets of each individual but protect the interests of children from previous relationships or concerns from business partners.

Prenup agreements can also protect against the other spouse’s debt. Without a prenup, creditors can go after the marital property even though only one spouse is the debtor.

An experienced family law attorney can help construct enforceable pre- and postnuptial agreements.

Spousal Support in High Net Worth Divorces

Unlike child support, there is no guaranteed right to alimony in Georgia, nor is there any calculated format to follow. Instead, alimony is based upon the “need” of the receiving spouse and the “ability to pay” of the obligated spouse.

In Georgia, there are two primary types of alimony: temporary alimony and permanent alimony.

Since high-net-worth individuals don’t always draw a regular paycheck and may be paid in dividends, rents, royalties, stock options and/or bonuses, it can be difficult to untangle these finances to determine what type of income each spouse is receiving or needs.

A skilled Atlanta divorce attorney can negotiate favorable spousal arrangements.

Working with Financial Experts in High Net Worth Divorces

Financial experts and advisers can play a vital role in financial planning during a high net worth divorce. Consider seeking the help of:

• Certified Public Accountants (CPAs) focused on the tax implications during division of assets. CPAs will sometimes also work on forensic accounting to help find hidden assets.
• Business valuators focused on the value of business ownership and can facilitate the negotiation.
• Certified Financial Planners (CFPs) focused on planning for the future after the divorce (including retirement planning, risk management and investments).

Legal Representation for Atlanta High-Net-Worth Individuals

It should go without saying that high net worth divorce clients require experienced, professional legal counsel to protect their assets. Eugene “Pete” Chambers, III has been practicing family law exclusively for 38 years.

His long-standing success is due to his genuine devotion and sincere concern for the well-being of each client; combined with his knowledge of the law and his personal journey and experience as a divorce client.

Speak to Pete now about your unique situation and learn how he can help you.